How a VC turned entrepreneur made his eCommerce company profitable

Manoj Gupta is Founder/CEO of Craftsvilla.com and was previously Principal at Nexus Venture Partners – an India focused $600 million Fund. Manoj Gupta was also previously board member of mulitple companies including Yebhi.com and Sohanlal Commodities in India before founding Craftsvilla. Here he tells us why Craftsvilla became profitable.

Manoj Gupta (image credit: Anshika Varma)

Manoj Gupta (image credit: Anshika Varma)

The question “Why Craftsvilla.com became profitable?” may sound naive with most obvious answer “Off course you should become profitable”. But our stretch of answer is beyond that obvious. Here I narrate the story of our roller coaster journey and today how we stand tall in ecommerce why others fall because we looked for the answer to the above question not just for survival but to carve a long term story of success without the ICU help by VCs of this country. Here is narration of that short but wild west story.

Craftsvilla.com today is a stand alone proftable entity without significant funding from VCs. Given I was a VC before, I knew how fast a VC drops a ball on you in bad times and salivates in front of you in good times. So sensing exhaustion of VCs passion for ecommerce, we started preparing for the worst “no-money” scenario before others and formulated strategy around three basic acton points:

1. Reduction of Cost

2. Reduction of Complexity

3. Expansion of Revenue

About six months back, we were 80 people. Today we are eight people doing more business than when we were 80. Its amazing how efficiencies creep in when you have optimally sized team. The “lazy” ones were the first to go, “talkative” species the next one, “political” crap the third lot and “lesser skilled” ones were the last. Only folks left are hard working, passionate, die hard ones who are now shaping next journey of Craftsvilla.

About six months back, we had five offices across India. Today we have one small room office. Its amazing how efficiencies creep in when employees are seated next to each other from different functions and solve the related issues faster. For example, today we have the fastest payment cycle thanks to our tech and finance guy sitting together. Our customer care team clears all the emails daily because our dispatch and customer care team sitting closeby.

About six months back, we had multiple business models with mulitple commission structures. Today we have one simple business model withone commission structure. Its amazing how efficiencies creep in when you keep things simple. We need lesser staff because we shut down business model called imanage where we managed logistics of our sellers which was consuming 80% of our resources but contributing only 20% of our revenue. We need lesser space, we need lesser coordination and we have more time to think what else we can do quantumly different to take us to next level.

The result of all these is that today we are profitable with steady growth of 15-20% month on month, with Zero discount and COD, with double the conversion on our traffic and average order value and much higher repeat. Our customer acquisition cost is below Rs. 250 and we are recovering our marketing dollars in the first purchase of the customer.

We did all these not to just become profitable, but to make our business capital efficient, scalable and sustainable. We became profitable to mould our business and organization for next level growth which is going to be biggest what this country has witnessed in Ecommerce. We became profitable to become less dependent on fluctuating VC passion and money. We became profitable so that VCs can chase us and not we chasing them which always has worst outcome. We became profitable since to build a billion dollar organization in India which you can exit for your shareholders, you have to become profitable. We became profitable to show everyone that you can become profitable in Ecommerce. We became profitable to show our Ecommerce peers that becoming “customer facing” and not “investor facing” is better for you since that transition is what we went through.

What we went through on our path to profitability gave us glimpses of path to success. We are now more confident that we will become succesful than we were six months back. I hope my few words here may help you to shape a future billion dollar organization in India.